UBS Chief Executive Officer Sergio Ermotti has raised the pressure that the major bank could move its headquarters out of Switzerland if stricter capital requirements are implemented. Ermotti escalated the tone in the ongoing debate regarding government plans that aim to oblige the bank to hold billions of dollars in additional equity. Speaking on a Wednesday analyst conference call, Ermotti stated that the institution is evaluating the long-term consequences for its competitiveness operating from Switzerland. He noted that while clients appreciate Switzerland, a Swiss passport is no longer sufficient by itself.
The remarks follow a meeting on Monday between Ermotti and members of the National Council. Following the discussions, the UBS chief sharpened his wording, responding to a decision from the previous month that dampened the bank's hopes of softening government plans for a 16 billion dollar capital increase. Previously, Ermotti had avoided issuing a direct threat regarding a relocation, but the prospective defeat raises the stakes in the current legislative debate. Ermotti described the situation as a critical juncture that will set the course for the Swiss financial sector for decades to come, while emphasizing that no urgent decisions are pending.
The Swiss Federal Council has sought ways to secure the country's sole remaining major bank since the collapse of Credit Suisse more than three years ago. A central pillar of the reform proposals involves raising capital requirements to prevent overseas operations from dragging down the domestic unit. UBS argues that these measures destroy its competitiveness. Ermotti questioned whether retaining a Swiss status remains decisive for the business model, noting that a Swiss DNA and roots are a major advantage, but not the primary reason clients conduct business with the firm.
Further political headwinds await UBS in the coming weeks as the National Council takes up the legislation from the Council of States. The larger chamber is expected to be more skeptical of bank requests. Ermotti called the September result in the Council of States very unsettling and criticized the disregard for consequences facing shareholders, whom he described as the first line of defense during crises whose financial support protected Switzerland's reputation and financial stability.
On Monday, Ermotti and UBS Vice Chairman Markus Ronner addressed the National Council's Committee for Economic Affairs behind closed doors as the institution continues efforts to persuade lawmakers to soften the legislation. The capital debate is heading toward a final vote that could occur as early as December, though a decision might stretch into next year.
During the call, Ermotti reminded investors of his preference for distributing profits over meeting regulatory demands. Accounting for dividends, the bank has returned to the profitability level recorded prior to the 2023 acquisition of Credit Suisse. UBS will conclude its ongoing three billion dollar share buyback program early next year and plans to provide updates on further buybacks, updated targets, and strategy in February. Two major shareholders, US asset manager Artisan Partners and Cevian, have previously urged the board to examine an overseas relocation, stating that Switzerland is no longer an attractive location for the banking giant.
